Status, Happiness, and Relative Income
AbstractModels of status based on Frank’s (1985) count of the number of people with lower conspicuous consumption are inconsistent with the extensive empirical literature on happiness and well-being. The alternative approach to consumption interaction which uses some form of relative income has been developed in various contexts. These predict that a representative agent’s well-being will increase with real income or consumption. However, this is again inconsistent with the time-series evidence for advanced economies. In this paper we combine a simple model of relative income with a distribution of ability that correctly predicts both time series results of near constant utility, and the positive, concave cross-sectional relation between income, working time and happiness.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2658.
Length: 29 pages
Date of creation: Mar 2007
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Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D6 - Microeconomics - - Welfare Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-31 (All new papers)
- NEP-CBE-2007-03-31 (Cognitive & Behavioural Economics)
- NEP-HPE-2007-03-31 (History & Philosophy of Economics)
- NEP-SOC-2007-03-31 (Social Norms & Social Capital)
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